Bank of Hawaii Beats on Earnings, Revs - Analyst Blog

Bank of Hawaii Corporation's BOH first-quarter 2014 earnings per share came in at 87 cents, beating the Zacks Consensus Estimate by a penny. This also compared favorably with 81 cents earned in the year-ago quarter.

Results were driven by increased net interest income and lower expenses. While loan and deposit balances showed improvement, a decline in non-interest income was the downside.

The company's net income was $38.6 million, up 7.3% from the year-ago quarter.

Performance in Detail

Bank of Hawaii's total revenue inched up 0.5% year over year to $147.4 million, surpassing the Zacks Consensus Estimate of $140 million.

The bank's net interest income was recorded at $93.2 million, up 5.3% year over year. Net interest margin NIM increased 5 basis points (bps) to 2.87% from the prior-year quarter.

Non-interest income was $44.8 million, down 6.3% year over year. The fall was primarily due to a 69% decline in mortgage-banking revenues.

The bank's non-interest expense was down 1.0% year over year to $83.5 million. The decline primarily resulted from lower salaries and benefits as well as fall in net occupancy.

As of Mar 31, 2014, total loan and lease balances rose 7.4% from the end of the prior-year quarter to $6.2 billion while total deposits increased 7.0% year over year to $12.0 billion.

Credit Quality

Credit quality showed improvement in the quarter. As of Mar 31, 2014, allowance for loan and lease losses fell 10.1% year over year to $114.1 million while nonperforming assets declined 3.5% to $37.0 million from the prior-year quarter.

For the seventh consecutive quarter, the company did not record provision for credit losses.

Capital and Profitability Ratios

While capital ratios were mixed, profitability ratios showed improvement in the quarter. The ratio of tangible common equity to risk-weighted assets was 15.51% compared with 17.04% at the end of the year-ago quarter. The Tier 1 leverage ratio was 7.06%, up from 6.90% in the year-ago quarter.

Return on average assets increased 4 bps year over year to 1.12% while return on average shareholders' equity spiked up 105 bps to 15.15%.

Capital Deployment Update

The company repurchased around 214.5 thousand shares of common stock at an average price of $58.23 per share during the quarter. From Apr 1, 2014 to Apr 17, 2014, the company further repurchased 45.5 thousand shares of common stock at an average price of $59.03 per share.

Our Take

We believe disciplined approach to risk and capital management, continuously improving commercial segment, organic growth and prudent expense management will act as growth drivers in the near term. Additionally, the bank's capital deployment activities are likely to raise investors' confidence in the stock.

However, the low interest rate environment, stringent regulatory conditions and absence of credible improvement in the mortgage market will keep bottom line under pressure in the coming quarters.

Bank of Hawaii currently carries a Zacks Rank #4 (Sell)

Performance of Other West Banks

First Republic Bank's FRC first-quarter 2014 earnings of 67 cents per share beat the Zacks Consensus Estimate of 64 cents. Results benefited from revenue growth and capital strength, partially offset by rise in expenses.

Westamerica Bancorp's WABC first-quarter 2014 earnings of 58 cents per share were in line with Zacks Consensus Estimate.

SVB Financial Group SIVB is slated to announce results on Apr 24.